[ticking] >> the mood is dark. people are pissed. why not try to do better? >> jeff immelt is the ceo of general electric and one of the country's most important business leaders. now he may have an even more important title, jobs czar. immelt, a republican, was recruited by president obama to help generate ideas about creating jobs. >> if you just looked at how many hours a day do republicans spend on job creation, do democrats spend on job creation, does the white house, it's nowhere close to 100%. we're not spending enough time on jobs. >> you know, the economists say that the recession's over. >> really?

they should come to newton, iowa. [chuckles] >> and this is what they would see in newton, iowa: a maytag plant, where 2,500 people worked, now abandoned. this was the chrysler dealer, the chevy dealer, the tractor supply company. it helps explain why there is so much anger in the land. >> i'm sick and tired of people going to congress and washington, d.c., and making a living out of it while we starve to death. >> i believe we ought to make the tax cuts for the middle class permanent. >> we have now got both parties essentially telling a big lie, with a capital "b" and a capital "l," to the public. >> cut taxes. >> cutting taxes. >> make the tax cuts permanent. >> the republican party, as much as it pains me to say this, should be ashamed of themselves. >> this from ronald reagan's old budget director, architect of the largest tax cut in american history?

>> it's rank demagoguery. we should call it for what it is. >> welcome to 60 minutes on cnbc. i'm morley safer. in this edition, we look at two of the topics dominating the american economic landscape: jobs and taxes. first, we meet with president obama's so-called jobs czar. then we visit a struggling town in the heartland. and finally, we take a look at a controversial income tax initiative in washington state. in the first decade of the 21st century, big american firms cut around 3 million jobs in the u.s., while adding almost as many overseas. no company went global more aggressively than general electric, the conglomerate that makes everything from refrigerators to m.r.i. machines to jet engines. yet as lesley stahl reported in october 2011, when president obama was looking for someone

to help get americans back to work, he recruited a most unlikely candidate: the republican ceo of general electric, jeff immelt. >> the mood is dark. people are pissed. why not try to do better? >> jeff immelt talked about his czarship at a gathering of g.e. managers. >> you know, i grew up in cincinnati, ohio, and my parents are really right-wingers. my dad watches, like, five or six hours of fox news every day and stuff like that. so i called home and said, "hey, just to give you a heads-up, you know, i'm gonna be with the president, and he's asked me to lead this jobs council." and my mother said, "well, you said no, of course, didn't you?" [laughing] i said, "no, mom, that's not what i said." [cheers and applause] thank you. >> when you were chosen, there was a lot of criticism. >> yeah. >> i saw a headline that said, "the job czar from hell." >> mm-hmm. >> because of how many jobs g.e. has outside the united states. >> i've taken heat from the

right and heat from the left, and it's been uncomfortable sometimes for me personally to work with the president on this. and i'm proud to do it. >> what he's doing is heading a council of ceos, wall streeters, and labor leaders to help the president come up with ideas for immediate and long-term job growth. we need to create 300,000 new jobs a month just to get back to where we were before the recession. >> i think, lesley, there just needs to be a sense of national urgency around jobs, that basically, if you just looked at how many hours a day do republicans spend on job creation, do democrats spend on job creation, does the white house, it's nowhere close to 100%. we're not spending enough time on jobs. >> one of the reasons the president chose immelt as his jobs czar is because he's actually building new manufacturing plants in the u.s. he wanted to show us one: this new factory in batesville, mississippi, where they're making jet engines for the new boeing dreamliner.

does anybody know how many different parts go into that? >> somebody does. i'm not sure, if it's--it's not me. >> it's not you. >> in this engine, we probably have invested $1 1/2 billion as a company before getting the first--the first sale. >> all told, he is adding 15,000 jobs in the u.s., about half in manufacturing. >> we've got whole new generations of jet engines, whole new generations of gas turbines. we're spending a lot inside the u.s. >> in louisville, kentucky, where g.e.'s appliance park has lost about 16,000 workers, he's actually bringing jobs back from china and mexico, where wages are going up. >> you know, with the currency weaker, with wage rates inflation lower here than the rest of the world, we think the u.s. can be quite competitive. >> what struck me is that the new plants don't hire a lot of people. you talk about hundreds instead of thousands. and i wonder, as you bring in new factories: they are so automated.

>> you're going to have fewer people that do any task. in the end, it makes the system more productive and more competitive. but when you walk through mississippi, for every person that was in that plant, there's probably seven or eight in the supply chain. >> a lot of the jobs we saw were $13-an-hour jobs. that's really not the ticket, is it, to a really vibrant middle class. >> we have a range. when we go out and recruit, let's say, hire 1,000 people at between $15 and $17 an hour, we get 50,000 applicants. so i think you've got to start somewhere, but we want to hire more people. >> coming up, going with the market flow. >> 60% of g.e.'s revenues is foreign. >> when i became ceo, it was 30. now, i wish all our customers were in chicago. i mean, everything about the u.s. is easier than doing business here. but this is where the growth is. >> we'll have more with jeff immelt when 60 minutes on cnbc

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>> in 2011, jeff immelt, general electric's ceo, agreed to become an advisor to president obama, his so-called jobs czar. but here's the problem: when it comes to creating american jobs, it's hard to compete with emerging nations like brazil, as immelt well knows.

>> brazil is buying more g.e. products than almost any other country. it's no wonder they have a g.e. company town 90 minutes from rio. you hear g.e., and you think schenectady, new york, lynn, massachusetts. petropolis, brazil? >> it's the world we live in today, lesley. this is where we have to be today to be successful. >> and they are wildly successful in brazil, where g.e. is growing at a rate of 35% a year compared to 1% in the u.s. immelt showed us around a g.e. locomotive plant. >> if you go back 5, 10, 15 years, maybe we made 30 or 40 locomotives here, you know, lesley. we're now making 150. >> here we can honk the horn. >> that's the horn? >> so just push? >> push down. [horn sounds] >> i need one of these in my office. >> g.e. has become so global that more than half of its 300,000 workers are now overseas.

we spoke to him on the floor of g.e.'s jet engine servicing plant in petropolis. how much of your revenues, now, come from overseas? >> 60%. >> 60% of g.e.'s revenues is foreign. >> when i became ceo, it was 30. now, i wish all our customers were in chicago. i mean, everything about the u.s. is easier than doing business here, but this is where the growth is. >> you know, it's like a bucket of ice on your head. i don't think we have caught up to the reality of how much the world is consuming and how we're slippin' back. >> you know, i don't think it has to be all bad news. i still think there's lots of things we can do in the u.s., but the customers are here. and that's just the way it is. >> g.e. has 8,000 employees in brazil, and rising. at factory rallies here, immelt, as cheerleader, looks out at the future of the company. >> i want you to get up every

day and want to beat caterpillar. i want you to hate the color yellow and do everything you can to make sure we're winning and beating the competition. >> on top of expanding the locomotive operation here, immelt is building a new aviation plant and a new research and development center in rio. you have also made the case that by increasing investment in a place like brazil, it would allow you to bring more jobs back home. now, that's counterintuitive. >> look around this room. all of these components come from the u.s. how are you doing? >> but after following him around brazil, i wondered whether g.e. was still an american company. >> i'm a complete globalist. i think like a global ceo. but i'm an american. i run an american company. but in order for g.e. to be successful in the coming years, i've got to sell my products in every corner of the world. >> i mean, you may personally think of yourself as an american, but your customers

are over there. you put your plants over there. you even put research. >> if i wasn't out chasing orders in every corner of the world, we'd have tens of thousand fewer employees in pennsylvania, ohio, massachusetts, texas. i'm never going to apologize for that, ever, ever. >> i love coming to these plants. >> it's great. >> you know, 'cause we actually see stuff getting made. >> getting made. 90% exported from here. >> that's exactly right. >> immelt worked with the president to devise his $447-billion jobs package. and he and his jobs council that's been holding meetings all around the country will give mr. obama more proposals, such as reducing government regulations and spending more to retrain workers. if the republicans say the government shouldn't spend, how the heck are we going to get ourselves out of this? >> no, no, this notion that the government has no role has never been true in the history of the united states. you know, really, all of the commercial aviation industry has

grown out of defense spending. all of the health care innovation has grown out of the n.i.h. >> in his ten years as ceo, immelt has remade g.e., selling off half the company he inherited, including plastics, insurance, and nbc. >> oh, my god. >> they're selling nbc to a company called kabletown... with a "k." >> at the same time, he has refocused the company on manufacturing, bulking up units like transportation, energy, and research and development. as jobs czar, he's urging his fellow ceos to double their hiring of engineers and devote more money to r&d. at g.e., he's triple-spending on everything from medical research to green technology, including the building of a solar panel factory in the u.s., even as other american solar companies are folding. is this something that's incredibly risky for you? >> in g.e., this is extremely

low risk because we have good technology and we have scale. the crime for us is when we don't do things like that. we ought to be percolating 20 $1-billion businesses all the time that can grow inside our system. >> but even while he promotes american innovation, he's been accused of transferring technology to other countries, as in his recent joint venture with china where a new g.e. computer system will go into a chinese airliner that could eventually compete with boeing. >> it's a way we can grow, and it's approved by the u.s. government. it's in an important market around the world, and it creates 400 jobs in the u.s. >> let me be more specific. are we in any way giving the chinese a technology that they didn't have before, that depletes our competitive edge in the future? >> no, look, you're afraid of china; i'm not. we see them as a big market and a big opportunity.

>> one thing immelt is promoting that the president did not include in his jobs package is lowering the corporate tax rate from the current 35%, even though companies like g.e. rarely pay that much. one of the things that g.e. and you get hammered for is how little taxes g.e. pays. it's not quite zero, but it's pretty low. >> you know, we've had an extraordinary couple of years. we wrote off $32 billion during the financial crisis. i think that we should have basically the same tax policy that germany, japan, the u.k., everybody else has, which is a tax rate in the mid-20s and no loopholes, zero. the u.s. has the most antiquated tax system. and that means some people are going to pay more taxes, and some people are going to pay less. >> but i guess the big question for most people is, would that create jobs? >> that's a fair debate. you know, personally i think it's going to create jobs. >> but our companies are not spending.

they're not investing in a way that would create jobs. and big corporations are sitting on billions and billions of dollars. they're just sitting on it. >> companies should invest in the united states. it's still the world's biggest economy. and if companies just are going to sit on cash, they're going to lose. they're gonna lose, because only the people that are going to invest their way through this crisis are going to win. >> immelt is also supporting a tax holiday for global companies to get them to bring back home more than $1 trillion in profits they're keeping overseas. he says businesses would start hiring, even though they didn't when a tax holiday was tried in 2004. >> when it happened last time, it didn't. >> right. >> so there's plenty of evidence that says that i'm not right about that. in other words, do i know how many jobs it's going to create? i don't. but it can't intellectually be any good to anybody to have $1.2 trillion outside the u.s. >> shouldn't american corporations--don't they have some kind of civic responsibility to create jobs?

no? >> my name is not above the door. i work for investors. investors want to see us grow earnings and cash flow. they want to see us be competitive. they want to see us prosper. >> he wishes the public felt the same. >> i want you to root for me. you know, everybody in germany roots for siemens. everybody in japan roots for toshiba. everybody in china roots for china south rail. i want you to say, "win, g.e." >> do you not see any reason that maybe the public doesn't hold american corporations up here in the highest... >> i think this notion that it's the population of the u.s. against the big companies is just wrong. it's just wrong-minded, and when i walk through a factory with you or anybody, you know, our employees basically like us. >> they do. i saw it. >> they root for us. they want us to win. i don't know why you don't. >> since our report first aired, jeff immelt has remained a lightning rod

for some critics. but immelt's brand of realistic optimism continues unabated. coming up, tough times in the american heartland. >> i wonder when you look forward now, what you think about rehiring people. >> when we hire somebody, we're definitely gonna need them. we're not gonna hire one person until we need two or three, and we're probably not gonna hire two until we need four or five. >> the economic struggles of newton, iowa, when 60 minutes on cnbc returns. ♪

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such things say the recession ended back in june of 2009. but don't tell that to communities struggling to get back on their feet. in october 2010, on the eve of the midterm elections, scott pelley went to the american heartland and found that little had changed. anger was the order of the day. [thunder rumbling] >> what surprised you the most about this recession? >> i think the depth of it and the length of it. i think what surprised me the most about this one is, it just doesn't want to end. >> you know, the economists say that the recession is over. >> really? they should come to newton, iowa. [laughs] >> dave mcneer's advertising company is like a lot of small businesses: it's getting smaller. maxim advertising in newton, iowa, puts its customers' logos on nearly anything, and business had only grown for 22 years,

until 2007. and what was all of this? >> this was filled: maytag, maytag, maytag, maytag. >> maytag invented its washing machine in newton. 5,000 people worked for maytag here, but newton lost all of those jobs. maytag was bought out, and by 2007, the factory was closed. many of the jobs went to mexico. no one knew it then, but these were the opening days of the great recession. now layoffs that started with corporations are cascading into mom-and-pop shops. how many employees did you have at the top? >> 22. >> and today? >> 10. >> do you remember the first person you had to lay off? >> one of the very hardest days of my life. my wife and i stayed up all night long. we talked. we prayed. we struggled. and you know what, man, that's a gut-wrenching feeling. you hate it. i hate it, and i never wanted

to have to do it again. >> i wonder when you look forward now, what you think about rehiring people. >> when we hire somebody, we're definitely gonna need them. we're not gonna hire one person until we need two or three, and we're probably not gonna hire two until we need four or five. [leaves rustling] >> and that's why the recovery is lifeless. big and small, businesses have settled into doing more with fewer people. >> you ask people to step it up and work harder, work longer, make less. >> is it sort of a new normal? >> i think for now it is. >> take a quick look around newton. gary forbes laid off half of his 60 employees, closed two locations, and switched from selling top-quality furniture to scratched and dented. website designer cindy brunner laid off 6 of her 14 employees. this was the chrysler dealer, the chevy dealer,

the tractor supply company. since the recession, we've seen a lot of troubled towns in the country but nothing that looks quite as broken as newton. even the local chapter of the optimist club has closed. >> you know, i want to tell everybody that we're a company town where the company left, but we're gonna thrive. >> chaz allen is the mayor of this town of 15,000 people. it's a part-time job. pays about $4,000 a year. allen walked us through an abandoned maytag plant that, at its peak, held 2,500 factory workers building washers and dryers. if anyone out there is interested, the mayor has more than 1.7 million square feet to rent. >> it is available. it is available. we'll make you a good deal. >> the mayor's been trying to pull new jobs into town. he made a run at green energy and got a company that makes wind turbine blades. but every time he gets a few hundred jobs, he seems to lose a few hundred.

this fall, a telecom company called windstream had two layoffs. >> it was 60, and then it was 146 the next time. >> and how does that affect people around here? >> you know, it's a roller coaster. i want to say that-- i mean, i was affected in the first layoff. i was one at the windstream that was affected the first round. >> wait a minute. >> yeah. >> they laid off the mayor? >> yeah. >> are you working now? >> no. >> his town is shrinking. they closed an elementary school, and they're slashing the city budget. have you already lost policemen? >> yes. >> firemen? >> yes. >> what about the hospital in town? >> it's being reduced in size as well. >> coming up, the people versus politicians. >> how many of you would say that you're angry about politics right now? [people murmuring] oh, that got a big yes. >> i'm sick and tired of people going to congress and washington, d.c., and making a living out of it, while we starve to death. >> that's ahead when 60 minutes on cnbc returns.

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>> newton, iowa's congressional district is bipartisan country. it voted for george bush in 2004 and then for president obama. but on the eve of the 2010 midterm elections, newton was angry with washington, and the town's long-time congressman was feeling the heat. >> hi. how you doing? >> democratic congressman leonard boswell is fighting for his job. he's been reelected here six times, but this week his race against republican brad zaun is too close to call. >> my wife and i watched the

news last night, and i think every ad was a political ad. >> who do you trust with your money, with your future? it's not brad zaun. >> leonard boswell: too wrong for too long. >> incredibly, bruce braley supports building a mosque at ground zero. >> how much relevance does all of that have to you? >> nothing. doesn't have a bit of relevance to me. >> we invited some of the folks in town to the legion hall. how many of you would say that you're angry about politics right now? [people murmuring] oh, that got a big yes. >> i'm sick and tired of people going to congress and washington, d.c., and making a living out of it while we starve to death. >> does it matter much to anyone in here whether the republicans or the democrats control the house, for example? doesn't matter? [people murmuring] >> if a republican says it, the democrats don't listen. if the democrats say it, the republicans don't care what they're saying. >> what gets done in washington? what gets done

at the iowa state house? very little gets done. i mean, everything comes down to either abortion issues, gay marriage issues. it needs to go above and beyond that. >> i don't have a job. that's all i care about. i don't care about the republicans or the democrats. i care about newton, iowa, the job situation, the financial situation. >> we went to the foreclosure auction the other day. nobody bid on anything. >> nobody has any money. >> help us. do something about the economy. it's really hard out here. >> the economy is not spurring jobs. >> todd meyer was laid off from the same telecom company that laid off the mayor. you served in the gulf war? >> i did. >> you were in the navy. >> yep. >> in combat there? >> yep, uss george washington. >> and now you're unemployed. >> yes. >> how many of you think that your children will enjoy the same standard of living that you did?

this worry--pessimism, really-- weighs on families who had seen a different future. how many employees did you have at the peak? >> 22. >> how many do you have now? >> i'm down to seven. half pepperoni, half pineapple? all right, fantastic. >> scott creech bought his own pizza franchise in newton 21 years ago. how many hours are you working? >> last week, it was 82. >> 82 hours in a week? >> correct. >> how long can you do that? >> until i die. >> sales have slipped to a place that's sometimes dangerous for his family. >> once you get down around this area, i may be able to file for food stamps. >> his wife, julie, is working at a school to take some of the pressure off. >> he's 52 years old now, and i worry about him every day. his brother died of a heart attack when he was in his 40s, and i worry about that all the time. >> hello, everybody.

>> hi, how are you? >> his son parker is ten. creech comes home to put parker in bed, but then he heads back to the shop. he washes up and closes up about 1:00 a.m. i wonder what the stress has been like for you. >> i've been blessed. you know, you have guilt. >> guilt about what? >> you'd like to have that 8:00 to 5:00 job, holidays off, but... >> you can't do that now. >> no. >> when you're looking for the path out of this flat recovery, there are a couple of things that strike you. one, small businesses create most of the jobs in this country, 65% of all new jobs, but lending to small businesses is actually declining. so three years after the beginning of the great recession, with interest rates the lowest they've ever been

in history, banks are lending less money to the engines that create jobs. have you gone to the bank? >> yeah. [chuckling] that's amazing, 'cause, you know, you hear stories about how lending is gonna be more friendly and-- you know, and even the president himself is, you know, gonna tell banks that they need to understand what businesses are going through. there's no banks-- the banks don't understand anything. they won't loan me a dime. >> and you went to the bank, and they said what? >> "come back when you have a couple of good years behind you." really? 'cause i won't need you then. [chuckles] >> they'll offer money to you when you don't need it, but when you need it, you can't get it. perfect? okay, we like to hear that. >> alan yegge has been losing money at his jewelry store on the courthouse square for a year and a half. he makes a lot of his own jewelry, and to try to match his customers' falling income, he switched from gold to silver, diamonds to beads. his employees darlene swank and tina kono even volunteered

to cut their hours. you're gonna have to let tina and darlene go. >> it's hard. it's hard. >> do you remember when you had to sit down and explain it to them? >> yeah, i talked to darlene first. i didn't have to say anything. she knew. you know, she does our books. and she knew. >> and what did the books tell you? help me understand. >> you just can't keep doing what you're doing. as hard as it is, we tried. >> more layoffs reduce demand, which creates more layoffs. change may be coming again to washington, but in newton, many believe the struggle will stay the same as family businesses work to steal another day from the great recession. >> congressman leonard boswell defeated his republican challenger, brad zaun, in the 2010 midterm elections.

he headed back to washington for an eighth term. for boswell's constituents in newton, iowa, the fight for economic recovery continues. coming up, bill gates' father on taxing the rich. >> the real truth of the matter is that the people that own businesses are the people who will be paying the tax, and my analysis is, they don't want to pay the tax. >> the rich guys don't want-- >> the rich guys don't want to pay the tax. >> are you saying you just think they're greedy? >> no, because it... [chuckles] no. they're defensive. they're--i guess you could call it greed, i suppose, wanting to not write another check, sure. >> it's billionaires versus billionaires when 60 minutes on cnbc returns. [ female announcer ] the best things in life are the real things.

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>> one of the most hotly contested debates of the 2010 midterm elections concerned raising taxes on the rich as a way to reduce the nation's record budget deficit. but for president reagan's former budget director david stockman, raising taxes on the rich isn't nearly enough to cure what ails the u.s. economy. in october 2010, stockman told lesley stahl that all tax cuts implemented

by president george w. bush should be eliminated, even those on the middle class, and that his own republican party has gone too far with its anti-tax religion. >> tax cutting is a religion. what do you mean by that? >> well, it's become, in the sense, an absolute-- something that can't be questioned, something that's gospel, something that's sort of embedded in the catechism. and so scratch the average republican today, and he'll say, "tax cuts, tax cuts, tax cuts." >> cut taxes. >> cutting taxes. >> make the tax cuts permanent. >> it's rank demagoguery. we should call it for what it is. if these people were all put into a room on penalty of death to come up with how much they could cut, they couldn't come up with $50 billion when the problem is $1.3 trillion. so to stand before the public and rub raw this anti-tax sentiment, the republican party, as much as it pains me

to say this, should be ashamed of themselves. >> this from ronald reagan's old budget director, architect of the largest tax cut in american history? but he doesn't let the democrats off the hook. he says he cringes when he hears the president say things like this. >> i believe we ought to make the tax cuts for the middle class permanent. >> we have now got both parties essentially telling a big lie, with a capital "b" and a capital "l," to the public, and that is that we can have all this government, 24% of g.d.p., this huge entitlement program, all of the bailouts, and yet we don't have to tax ourselves and pay our bills. that is a--that's delusional. >> for those who say cutting spending is the answer, stockman says both parties have thrown in the towel on that. >> finally, even republicans have said, "there's nothing significant we want to cut." they don't want to cut social security entitlements. they don't want to cut medicare reimbursements of doctors, farm subsidies,

education loans for middle class students, certainly not defense. >> many of the states are in the same boat, facing huge deficits with few prospects for cutting, which is why washington state is joining the movement across the country to tax the rich. >> hey, everybody. >> voters will decide on initiative 1098 that would create an income tax but only on the wealthy, of whom there are many: 133,000 millionaires and 7 billionaires, including bill gates of microsoft. >> thank you. >> his father, bill gates, sr., has poured his own money into backing initiative 1098. >> some people say initiative 1098 is about soaking the rich. >> the tax would bring in $3 billion a year to be spent mainly on education, which has suffered cutbacks as the state reels under a massive deficit. >> vote yes on 1098. it's good for washington. >> washington is one of only seven states without any

income tax. the proposal would create a 5% rate on income over $200,000 for individuals and $400,000 for couples. a 9% rate kicks in at $1/2 million on individuals and $1 million for couples. let's say a couple earns $500,000. >> okay. >> how much do you think they'll have to pay? >> well, they would pay $5,000 because that's 5% of the $100,000 on which they would pay. >> oh, they would only pay on the $100,000. they're exempt up to the $400,000. >> precisely. >> so they'd only pay on $100,000. >> precisely. >> that's not very much... >> precisely. >> if you earn that kind of money. >> precisely. >> his son bill is on his side, along with the public employees unions. the other side is a who's who of the state's big businesses: boeing, amazon, and even microsoft. bill gates is still chairman,

but the ceo, steve ballmer, opposes the initiative, which is why they're calling this the battle of the billionaires. is it awkward? >> the word "awkward" fits, yes. >> ballmer's side argues that the "soak the rich" tax would stifle high-tech innovation and lead to businesses moving out of the state. we asked microsoft, amazon, and boeing for interviews, but they all declined. businesses are saying they'll leave. >> yes. the real truth of the matter is that the people that own businesses are the people who will be paying the tax, and my analysis is, they don't want to pay the tax. >> the rich guys don't want-- >> the rich guys don't want to pay the tax. >> are you saying you just think they're greedy? >> no, because it... [chuckles] no. they're defensive. they're--i guess you could call it greed, i suppose, wanting to not write another check, sure. >> steve ballmer? >> yeah. >> he's worth $14 billion.

you don't think-- >> he's a very fine guy too. the fact of the matter is, there are 43 states in this country that have a state income tax, and in those states the microsofts or the abcs, whatever, have not fled the state. it's just a gross exaggeration. >> coming up, the dire economic state of washington state. >> to cut people off hospice i think is immoral. to cut children off health care, to cut their education so they don't have a chance at a decent future, i think that would result in an immoral budget. >> the governor's case for state income tax when 60 minutes on cnbc returns.

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[ engine revving ] it's bringing the future forward. >> in 2010, the debate over the washington state initiative to introduce a state income tax for the first time pitted billionaires against billionaires. supporters of the initiative like bill gates' father scoffed at the notion that businesses would flee the state. but entrepreneurs like brian mistele were adamant that a state income tax would be very bad for business. >> this initiative really is a nail in the coffin of small businesses and start-ups in our state. it really impacts the tech community very heavily. >> nail in the coffin? you mean kill it off? >> that's correct. >> mistele is the ceo of inrix, the software company that monitors traffic around the world and provides data for g.p.s. systems and sites like mapquest. >> so this is a map of paris.

>> he says businesses would leave the state, especially high-tech companies like his that deal in data and aren't tied down by factories or assembly lines. he'd consider moving some of his 60 employees to other states where he has offices. and what are the states? >> massachusetts, florida-- >> massachusetts: income tax. go ahead. california: income tax. >> texas, florida, michigan, colorado. >> okay, four out of the six have income taxes. i mean, i've heard a lot of businessmen say what you're saying, and i keep wondering, well, where are they gonna move if they leave? >> well, each state has its own competitive advantages. so by adding this additional burden, it makes us much less attractive. >> adam stites is another entrepreneur who opposes the initiative. he moved his company, istores, from portland, oregon, across the columbia river to vancouver, washington, just nine miles away. >> it broke down to taxes. oregon has the highest income tax in the united states, and washington has the lowest

at 0%. >> istores is the largest online retailer of paintball equipment. [paintball gun clicking] stites has been hiring staff for a new company he acquired that sells prank novelties. this for halloween? >> it is for halloween or for any times that you need to be a man-eating shark. >> under the new tax, he would have to pay $50,000 a year. and that, he says, would hamper his ability to expand any further. this money, if it passes, will go specifically to education, 'cause they've been cutting schools and things like that. so what is washington state supposed to do about its schools in terms of revenue? >> i think that the state in aggregate needs to take a look at its expenses. >> like? >> i've had opportunity in portland to see cars being washed by third party washing firms cleaning cars on the weekends for state vehicles.

i don't have someone who comes and cleans my car in a van. >> that's in portland? >> it's in portland, but i think it's indicative of government spending. >> but the state budget has already been cut by $5 billion. and the governor, christine gregoire, says they're at the bone. >> to cut people off hospice i think is immoral. to cut children off health care, to cut their education so they don't have a chance at a decent future, i think that would result in an immoral budget. >> she says she doesn't understand why so many of the state's high-tech ceos, who are always complaining about the woeful state of american education, are so opposed to paying this tax for schools. these businesses that want the educated workforce, they're against this. what do they say to you when you challenge them on this? >> i tell them-- i have the utmost respect for them. these are great ceos. and i say to them, "here's the problem: you always want us to invest more in education, and now you say no.

so my question to you, if not this, then what? don't just tell me no." >> well, what do they say? >> they don't have an answer, lesley. >> the initiative was way ahead in the polls until the opposition started airing ads saying 1098 is a slippery slope. >> and can be extended to you in just two years. >> polls now show the middle class thinks they, too, will be hit with income taxes. and the high-tech entrepreneurs we met say there's a fairness issue. bill gates got to start microsoft without an income tax. and this is something you hear a lot, that they find it curious gates is supporting an income tax now. >> i believe the gateses have already made most of their money, so they wouldn't be taxed under a new income tax structure in our state. >> they wouldn't be taxed at all? no. >> well, for people who have already made their money and paid taxes in this state, that money wouldn't be taxed again. it's only for people who are earning new money in this state. >> well, that's ridiculous. i mean... i mean, my son will pay a huge,

huge income tax. >> he will? >> come on. he's the richest man in the country. what-- >> no, but i'm asking-- >> how can anybody think he isn't gonna pay a huge income tax? >> what is the income-- >> what does a person with $50 billion have for income? >> it's on-- >> this conversation isn't making any sense. >> bill gates would pay multimillions in taxes on the income from his investments. he wants to. he's told you that. he's for this. >> well, "wants to" is a little strong. >> okay, he's for this. >> he is for it. he's very willing. >> but as david stockman will tell you, that attitude is hard to find. >> we've demonized taxes, all right? we've created almost the idea that they're a metaphysical evil. >> still he says there should be a one-time 15% surtax on the wealthy that he estimates would cut the national debt in half. >> in 1985, the top 5% of the households, the wealthiest 5%, had net worth of $8 trillion,

which is a lot. today, after serial bubble after serial bubble, the top 5% have net worth of $40 trillion. >> oh, my god. >> and top 5% have gained more wealth than the whole human race had created prior to 1980. >> of course it would never pass. there's the rub. >> there's the rub. >> i remember that great expression, "let's kick the can down the road." >> yes. >> that became kind of the mantra. >> yeah, and it still is today. >> just kick it down the road. we'll solve it tomorrow. >> except it's no longer a can. it's a giant junkyard. [chuckles] >> on november 2, 2010, the week after our story first aired, washington state voters rejected initiative 1098. the income tax measure failed by a wide margin, with 64% of voters opposed to the measure and only 36% in favor.